Daily Deduction

No Tax Plan Yet, But Lots of New Ideas

Tomorrow: Ryan’s major speech on tax reform. Speaker of the House Paul Ryan “will talk about what tax reform looks like, not just the benefits” in an address to the National Association of Manufacturers. It is a year since Ryan and other House GOP leaders released their tax reform blueprint.

Will House Republicans pay for tax cuts with reductions in food stamps?Politico reports that the House Budget Committee’s fiscal plan, which may surface this week, would offset as much as $200 billion in tax cuts with reductions in mandatory spending for programs such as food stamps (SNAP) and welfare (TANF). The idea has strong support from the House’s conservative Freedom Caucus.

Over the next month: Stakeholders can make tax recommendations. Senate Finance Committee Chair Orrin Hatch wants industry groups and other interested parties to send in their recommendations for tax reform by July 17. He especially wants to hear their ideas about middle-class tax relief, reduced tax rates for businesses, improving savings and investment incentives, and modernizing taxation of multinational companies. He promises that submissions to taxreform2017@finance.senate.gov will be kept confidential. It is a curious request since business reps and others have been telling the committee for months what they want—and don’t want—from a tax bill.

Senator Ron Johnson has an idea. The Wisconsin Republican calls it a “viable Plan B” if the House leadership’s border-adjustable tax doesn’t pan out. While he has yet to flesh out details, his idea to slash taxes on corporations and raise taxes on shareholders is similar to one proposed by TPC’s Eric Toder and American Enterprise Institute’s Alan Viard. They’d tax corporations at a 15 percent rate and tax US shareholders on their accrued income at ordinary income rates.

Will any recommendations cover corporate tax avoidance? Reuters reports that congressional and administration staffers are looking at options to address profit-shifting schemes like transfer pricing, earnings stripping, and inversions. They may come to a decision on how to deal with the issues before June 29, the start of Congress’ July 4 recess.

On Wednesday: 7th Annual Joint IRS-TPC Research Conference on Tax Administration. The Internal Revenue Service and the Urban-Brookings Tax Policy Center invite you to attend the only annual conference focused exclusively on tax administration. Researchers from the IRS, other government agencies, academia, and private organizations will discuss ways to make tax administration as effective as possible. Register to attend in person, or watch the presentations and discussions will stream live here.

Are investors waiting for a tax cut? Maybe that’s why federal tax receipts are weaker than expected. TPC’s Steve Rosenthal says that investors may have been putting off the sale of stock while they await a cut in capital gains tax rates. “Congress itself could alleviate this uncertainty by providing an effective date for the new, lower, capital gain tax rates. If so, taxpayers could sell their property at potentially lower tax rates—ending the current lock-up. Of course, Congress would still have to pass the bill, which is yet another risk tax-sensitive investors would have to weigh.”

How might Congress improve the taxation of small business? TPC Director Mark Mazur shared ideas in testimony to the Senate Small Business and Entrepreneurship Committee last week: “Congress [could] take steps to reduce complexity. For instance, it could expand expensing, which allows firms to deduct the full cost of capital investment in the year it is acquired. Or it could allow firms to replace complex accrual accounting with cash accounting, which could be simpler and lower tax liabilities. In essence, reducing tax complexity on small businesses can address multiple principles of tax reform.”

Oregon’s House makes a move to sustain Medicaid for two years. The chamber passed a $670 million plan to increase taxes on hospitals, health insurance plans, and coordinated-care organizations that facilitate the state’s Medicaid program.The revenue would fund Medicaid services and keep open a newly constructed psychiatric hospital.

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